Understanding China’s digital consumers

Understanding China’s digital consumers

With six million new users jumping online every month, China’s internet population is mushrooming.

Davis Lin, Laxman Narasimhan, Jun He

With six million new users jumping online every month, China’s internet population is mushrooming. From 420 million today, China could have as many as 750 million people online by 2015, according to estimates by global management consulting firm McKinsey & Company in a new report, “Understanding China’s Digital Consumers.”

In addition to boasting the largest internet population in the world, China also has the largest number of mobile internet users. Over the next two years, McKinsey estimates an additional 100 million people could be logging on to the internet via mobile devices, on top of the 233 million people that currently do so today.

The research highlighted seven consumer segments in China with widely varying usage patterns and preferences for digital applications and devices. For example, the largest segment, the “traditionalists,” comprises a whopping 125 million consumers. They watch more television than average and are less likely to own, or want to own, digital devices. They are less educated, compared with other Internet users, and many live in smaller cities.

Even the smallest segment, “digital junkies,” includes 25 million of some of the most intensive Internet users on the planet. They spend 34 hours on digital media a week, compared with an average of 15.8 hours for all users; 26 percent of them own a laptop compared to just 16 percent overall. They are young – 42 percent are between the ages of 18 and 24 – and are always on the lookout for the latest gadget. On average, “digital junkies” replace their mobile handset every 17 months.

A relative late-comer to the internet, China has in the space of just a few years narrowed the gap with developed markets such as the US. According to McKinsey’s study, US internet users spend 93 hours a week on internet related activities, including communication, entertainment, and e-commerce. In China, digital consumers spend 40 hours online, indicating significant room for further growth.

While digital consumers in China also enjoy watching online video and downloading music and games, they still fall well behind their US counterparts. The typical US consumer spends 3 times longer watching and downloading online videos than the average Chinese consumer, and 4 times longer downloading music. Chinese gamers, however, log an average of 4-5 hours per week on online games, running a very close second to US gamers.

“There’s a wealth of data available today on how Chinese consumers use internet applications and devices. But whether it’s applications, digital devices, or e-commerce business models, no one size fits all in China. The substantial differences between China’s digital consumers, as highlighted by the seven distinct segments we identified in our study, point to the need for marketers to develop tailored offerings,” says Alan Lau, a Partner in McKinsey’s Hong Kong office.

“The digital landscape in China is changing daily. China’s digital consumers are evolving rapidly, both in terms of the devices they use to access the internet, and how they use their time when they’re online. Companies that can develop a granular understanding of these consumers will be better positioned to develop attractive – and profitable – business models,” says Davis Lin, a Partner in McKinsey’s Taipei office and co-author of the report.

Additional findings:
From 420 million today, China could have as many as 750 million people online by 2015

Between now and 2012, an additional 100 million people could be logging on to the internet via mobile devices, up from 233 million today

Over one-third of “digital junkies” and “mobile mavens” replace their mobile phones every 12 months or less

“Digital junkies” spend 34.1 hours a week on the internet, over twice the 15.8 hours a week spent by the average digital consumer in China

“Gamers” spend 8 hours a week playing online games, versus just 2.5 hours a week for the average digital consumer in China

Chinese consumers spend 4 hours a week on instant messaging, compared to just 2.6 hours a week by US consumers

Chinese consumers spend 2.7 hours a week communicating through voice over internet protocol applications, compared to 6 hours in the US

On average, Chinese digital consumers spend 20 minutes a week on email, compared with 5.5 hours a week in the US

About the report
Who are China’s Internet users? What applications drive them online, and what makes them stay there? What devices are they using, and how will this change over time? Marketers seeking to appeal to China’s swelling population need these kinds of details to help them make informed business decisions.

“Understanding China’s digital consumers,” attempts to fill the information gap. In 2010, we surveyed more than 5,000 digital consumers in more than 20 Chinese cities. In addition to collecting basic demographic data, we asked them questions that helped us to identify two critical dimensions of their digital persona. The first describes how much time consumers spend on digital devices (such as mobile phones and smartphones, PCs, TVs, and game consoles) and how they allocate time between various applications (such as email, instant messaging, and games). The second dimension looked at how much money consumers spend on digital devices and applications.

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